[BN] the know

Canadians now developing U.S. side of the falls

Canadian investors say the Time is right to DEvelop hotels across border in Niagara Falls, N.Y.

Canadian developer Michael DiCienzo, whose family has invested $800 million in Niagara Falls, Ont., over the past 20 years, is the latest of three owners who have spent $34 million upgrading the Sheraton at the Falls on the American side of the falls.
“Things are happening. A lot of things have changed. More than ever, we have a stronger interest in reinvestment in this area.” – Michael DiCienzo, hotel developer

NIAGARA FALLS – Canadians always seem to be the trailblazers when it comes to development in Niagara Falls.

They built the casinos, the glitzy hotels and the jam-packed downtown of neon tourist attractions.

Now the Canadians are at it again. But this time, they’re focusing on the American side of the falls.

Three groups of big-name investors – some who shaped the Canadian skyline more than a decade ago – have been scooping up hotels in Niagara Falls, N.Y., turning them around and injecting some $100 million in new investment into the city.

It’s the first step, they say, in making the former Honeymoon Capital a welcoming place for tourists and getting Niagara Falls back on its feet.

“Things are happening,” said hotel developer Michael DiCienzo. “A lot of things have changed. More than ever, we have a stronger interest in reinvestment in this area.”

DiCienzo’s family spent an estimated $800 million on projects in Niagara Falls, Ont., over the past two decades, namely the high-rises that offer unparalleled views of the falls.

Until recently, little of that money was invested in the American side, which has been marred by population loss, infighting and dysfunction for decades.

But that has started to change.

DiCienzo’s convention hotel across from the Seneca Niagara Casino has seen $34 million in recent investment, upgrading from a Holiday Inn to a Crowne Plaza to a Sheraton. DiCienzo is also embarking on a $10 million upgrade of a nearby Days Inn just across from the Rainbow Bridge.

And he isn’t alone.

Faisal Merani, also of Canada, has poured $8 million into a burned-out hotel near the North Grand Island Bridge, turning it into a Four Points by Sheraton with access to the Niagara River.

He has $25 million in other projects in the works, including the transformation of a vacant conference center into a six-story hotel at the edge of Frederick Law Olmsted’s state park.

“We’ve had seven years of steady growth, which is pretty unheard of, especially considering the recession,” Merani said. “In Canada, I think we hit that peak already. It’s really leveled off. But on this side, there’s going to be a lot more growth.”

A number of factors are driving the turnaround, developers say.

Favorable exchange rates have Canadian shoppers streaming over to American shopping malls or the Fashion Outlets at the edge of the city.

And tighter border restrictions since Sept. 11, 2001, have slowed the flow of traffic to the Canadian side – the same phenomenon that has led to the decline of casinos there.

“It created a perfect storm where the Canadians with passports were still coming across the border, but the family from Pittsburgh that doesn’t have passports comes and stays on the American side,” Merani said.

Developers say the American side of Niagara Falls has long been ripe for development, a blank canvas of prime parcels located just seconds from a natural wonder.

But for years, obstacles like a toxic political climate have kept away serious investors who were wary of doing business here.

“The city’s gotten better,” DiCienzo said, citing Mayor Paul A. Dyster as an example. “You’ve got a mayor that’s pro-development, he wants to see things through. His first question is always, ‘What can I do for you to make it easier?’ Not roadblocks. Before, we wouldn’t even go to City Hall because it was just a waste of time.”

The impact of federal prosecutions of Niagara Falls’ labor unions – and the disruption of their ties to organized crime – has also had an effect, developers say.

“The good criminals are gone,” Stinson said. “The current criminals are amateurs. I haven’t run into someone who’s given me icky vibes. Nobody threatened or ordered anything.”

Merani, who owns two hotels on the Canadian side, had also heard whispers about the way business had to be done in Niagara Falls.

“I’ve heard a lot of horror stories about the way it used to be,” he said. “Everyone says, ‘The Falls, it must be hard to build there.’ But it wasn’t. It’s simply not been that bad.”

Generous county and state incentives helped persuade developers to take a chance on developing parcels that had decayed for decades.

“In Canada, it’s more, ‘You’re on your own. There aren’t any handouts,’ ” said Toronto developer Harry Stinson. “Here, it’s like you just show up and ask.”

Stinson, who has been called “Canada’s answer to Donald Trump,” is heading perhaps the most ambitious project on the American side. He plans to pour $26 million into a restoration of the city’s grand Hotel Niagara, a Statleresque hotel that dominates the American skyline.

The Hotel Niagara once had guests such as Marilyn Monroe, Joe DiMaggio and Frank Sinatra. But like the city’s other hotels, it has seen better days.

“Millions of people come [to the falls] each year, but yet there’s a serious void in the hotel market,” Stinson said. “To me, that’s a no-brainer.”

Most importantly, developers say Niagara Falls is finally correcting the urban planning miscues that set it back for decades.

DiCienzo invested in the Sheraton after the state razed the Wintergarden arboretum, which blocked the flow of traffic from Niagara Falls State Park into the city. That move created more foot traffic on Old Falls Street, where he set up a Starbucks Coffee and TGI Fridays restaurant. It also led to the development of the Niagara Falls Culinary Institute, which is filling a restaurant void and bringing hundreds of young people downtown.

Farther up the Niagara River, the state has decided to remove a key section of the Robert Moses Parkway and install walking paths linking pedestrians to the river.

That has persuaded Merani to turn his Fallside Hotel project from a small renovation to a major reconstruction.

“With the Moses, it took us from spending X amount of dollars on this to saying, ‘OK, let’s blow this up and spend some money on this,’ ” he said. “It will be a riverfront hotel right on the water.”

But despite the construction, there are no plans to build a towering skyline of fancy buildings like that in Niagara Falls, Ont.

That’s because a “geographic difference” exists between the two cities, said Christopher J. Schoepflin, president of USA Niagara Development.

“The view of the Horseshoe Falls is only on the Canadian side, and so that is really what’s driving their vertical building,” he said. “On our side, we have other advantages, which is adjacency and the ability to get very much on top of and into the natural wonders, whether the waterfront or the river gorge.”

That’s just fine with the developers, who have little desire to mimic what they have already built in Canada.

“What it should be is emulating Niagara-on-the-Lake, and not Niagara Falls, Canada, which has its own problems,” Stinson said. “Be something different – that will flourish. Trying to emulate the other side when you don’t have the view is not the right approach.”

At Merani’s hotel, for instance, visitors leaving the downtown area can retire to an enclosed lounge with spectacular views of the upper river, or play around at a new boat dock outside.

“A lot of people like that it’s not so busy on this side of the border,” he said. “They want things to do, but they’re on vacation, they want to be calm and relaxed when they stay here.”

Development officials estimate the American hotel market could hold up to 1,000 new hotel rooms in the next four years – most in the upscale marketplace.

“A hotel is to the tourism industry what a factory is to manufacturing,” Dyster, the mayor, said. “Lots of other good things spin off of that piece, but you have to have the central piece there in order to be a player.”

The next step, he said, is for the investors to develop the attractions that could expand a family’s average stay from a few hours to two or three nights.

“It suggests that when we get the other pieces of the puzzle in place, the Canadian investment community is watching closely and is going to be willing to come on board and get the capital projects done we need to get done,” Dyster said.

That would make Niagara Falls into the kind of place it always should have been.

“It’s on the bucket list,” Stinson said. “Disney, New York City, Las Vegas, Niagara Falls, it’s one of the places to go.

“Right now it’s not considered an option,” he added. “I think in the next three to four years, it will be considered an option.”